Michigan Below Grade Basement Appraisal

[mroger21]

I recently went to the expense to finish a basement in my Michigan home. I put in egress windows and had everything inspected officially throughout the process. The basement has standard height ceilings and is finished to match the other levels of the home. I went to refinance my home last year and when the appraisal came in it did not count my basement as square footage. I was told a basement does not count even it is passes egress and all other building requirementsin the state of Michigan. I may not be able to do anything about this home but may prevent investing next time without return if I knew the rules better. What are they? I have looked around a bit at other states where the basement is counted if it meets requirements. Does having a walkout change the situation? What about an external stairway even if the basement is below grade?

 

[lizhorvath]

Welcome!
In the state of Michigan, square footage that is not 100% above grade does not count as Gross Living Area. That means, even if you have a walkout basement (with the walkout to the rear) it does NOT count as GLA because the "Front" of the basement is still underground. While you will likely not see a dollar for dollar return on your investment, a finished basement often makes a home more marketable, which will likely help at the time you sell the property. It will be more attractive to a buyer and they would be more likely to pay somewhat more compared to your neighbor who does not have that finished space (or course, those numbers depend on your market).
Go ahead and make the investment in the future - you are sure to enjoy the additional space you can utilize for recreation or lounging, and in resale, it will most likely increase your sale price over comparable properties without finished basements.

 

[Dave Smith]

Below grade

Your basement question is not limited to Michigan.

Most residential appraisals are completed in accordance with Fannie Mae guidelines. Those guidelines address the basement or below grade space as follows. The underlining was added for emphasis.

Section 404.06 - Gross Living Area

The most common comparison for single-family properties (including units in PUD, condominium, or cooperative projects) is above-grade gross living area. The appraiser must be consistent when he or she calculates and reports the finished above-grade room count and the square feet of gross living area that is above-grade. For units in condominium or cooperative projects, the appraiser should use interior perimeter unit dimensions to calculate the gross living area. In all other instances, the appraiser should use the exterior building dimensions per floor to calculate the above-grade gross living area of a property. Only finished above-grade areas should be used - garages and basements (including those that are partially above-grade) should not be included. We consider a level to be below-grade if any portion of it is below-grade--regardless of the quality of its "finish" or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade room count.

Rooms that are not included in the above-grade room count may add substantially to the value of a property--particularly when the quality of the "finish" is high. For that reason, the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the "basement and finished areas below-grade" line in the "sales comparison analysis" grid. To assure consistency in the sales comparison analysis, the appraiser generally should compare above-grade areas to above-grade areas and below- grade areas to below-grade areas. The appraiser may deviate from this approach if the style of the subject property or of any of the comparables does not lend itself to such comparisons. However, in such instances, he or she must explain the reason for the deviation and clearly describe the comparisons that were made.

 

[Ted Martin]

Even though it doesn't count at AGLA (Above Grade Living Area) it still should have been given value one or two lines down the grid in the basement finish section.

Although I don't work in Michigan I can tell you how I complete my reports. Generally the area and room count which is at or above the threshold of the front door goes on the lines in the grid which are for AGLA, the next two lines down are where I report the basement, basement rooms and adjust for the basement finish. The next line down is call function and I will make an adjustment there to reflect the egress windows or walkout. The way I complete the form should not be mistaken for a standard or requirement, other appraiser's both in my market and probably in yours have equally valid methods and report writing styles that are equally acceptable.

 

[Indiana Jones]

Like Dave posted, basements are NEVER counted as square footage, even if it is a walkout. However, in my market, finished basements are very disriable if finished in a similar fashion to the rest of the home and with at least 7'6" finished ceilings.

Did the appraiser use comparables that also had finished basements? If not, did he give any value to your basement?

 

[Artemis Fowl]

Did the appraiser use comparables that also had finished basements? If not, did he give any value to your basement?

This is important. The adjustment may not be present simply because the comparable selection contemplated finished basements. While it may appear that he/she did not give value to it...it is likely implicit in the appraisal. I would not generally expect a dollar for dollar return on investment into a finished basement. It very much depends on the market reaction in your particular neighborhood. Also...everything Liz said